Institutions and well-being in Africa: do political and economic institutions matter?

Abstract

This study examines the relationship between formal institutions—both political and economic—and well-being in African countries from 2010 to 2020. Unlike previous research that often treats these institutions in isolation or as a combined factor, this study employs a disaggregated institutional framework proposed by Acemoglu et al. (2005) and Rodrik (2005) within a panel data model. The findings confirm that both political and economic institutions influence well-being, though their impacts differ. Economic institutions, particularly those fostering market creation and stability, contribute most significantly to well-being, while electoral rules exhibit minimal and weak effects. The results remain robust across various tests, including alternative control variables and subsample analyses. These findings suggest that African governments should prioritize economic institutional reforms before political reforms. Furthermore, fostering sincerity, trust, and collective commitment is essential for restructuring economic institutions, ensuring citizen participation in institutional design, and enhancing overall well-being.